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ONE PAGE MEMO TO BOSS

HIGHLIGHTS OF THE PERFORMANCE
1. ACTUAL SALES HAS EXCEEDED OUR EXPECTATIONS AND IT IS $4566388
2. SALES IN UNITS IS MORE THAN THE STANDARD AND IT IS 565000 UNITS
3. FIXED MANUFACTURING OVERHEAD IS LESS THAN THE BUDGETED COST
4. OTHER EXPENSES ARE IN CONTROL

MAIN CONCERNS:
1. ACTUAL PROFIT IS LESS THAN OUR EXPECTATIONS AND IT IS only $6561
2. Variable expenses are more THAN THE BUDGETED COST and it has exceeded by $614052. This is due to higher labour, material and variable expenses.
3. OUR CONTRIBUTION MARGIN IS LESS THAN OUR EXPECTATIONS BY 4%

CONCLUSION

THOUGH OUR SALES HAVE GONE UP BUT OUR PROFITS HAVE GONE DOWN ACCORDING TO STANDARDS.

Questions to be asked to Plant manger
When we look at variances, we are trying to establish the difference between what has actually happened (what we did achieve) and what we thought should have happened, namely the original budget (what we should have achieved).

Sales Variances
The sales revenue figure that will be included in the profit and loss account would have been calculated by multiplying the total units sold by the price per unit. When looking at the sales variances we once again consider two aspects; was the selling price as per the original budget (the price variance) and were the number of units sold as budgeted (the volume variance).

The first of these variances is in monetary terms and the second being in units.

The sales price variance, as you would expect, looks at the price that we did get, the actual revenue received from the sale of the units, and the price we should have got if the standard price per unit had been obtained. The variance is clearly UNFAVOURABLE since we did not receive the amount of ...